European mix data questioned the previous week's growth.
After US GDP numbers show technical recession in the US, it is the Asian turn to raise the concerns. According to the data published on the first day of August, factory activities in South Korea fell for the first time in two years. Japanese economic activities are also facing a slow down after ten months of increase. In China, official factory activities data missed the expectations and stayed under the expansion area at 49. This is while Non-Manufacturing PMI also fell to 53.8 amid fresh COVID-19 outbreaks. Caixin Manufacturing PMI in July was also at 50.4, missing the expectations and decreased from 51.7 in Jun.
After data mentioned in Asian countries, we had the PMI numbers from Europe, which were mixed. While Spain, Italy, and France missed the expectations, German and Eurozone Manufacturing PMI numbers were better than estimates. On the other hand, German's retail sales in Jun fell sharply by -8.8% on the annual scale.
On Friday, June's US Core PCE price index posted the most significant monthly increase since May 2021, at 0.6%, beating market expectations by 0.5% and 0.3% in May. The annual rate of the Core PCE price index, also at 4.8%, increased 0.1% from a month ago. With these data, the market expectation for another aggressive rate hike should improve for the September meeting.
On top of that, personal income and spending in the United States rose to 0.6% and 1.1% in June, beating market expectations of 0.5% and 0.9%. Later, the Chicago PMI fell to 52.1 in July, the lowest level since August 2020.
In response to the increasing inflation, the US bipartisan is expected to pass the $740 billion "Inflation Reduction Act of 2022" shortly. The bill's goal is to increase the taxation of large companies, provide energy stability, reduce the fiscal deficit, and extend the funds required for medical insurance to reduce inflation. However, will that be effective or not for now? Market participants doubt that.
Looking at the mentioned numbers and data across the globe can understand why the current market will focus more and more on the risk of economic recession. Recent surveys show that Wall Street expects the US to enter a recession later this year or early 2023. The market also cooled expectations for the Fed to raise interest rates.
With these outlooks, last week's gains in the stock markets can be used as, for now, doubts about the future are more substantial than positive sentiment in the markets.
